Morgan Stanley moving back to downtown Allentown

THE MORNING CALL, FILE PHOTO

Financial services powerhouse Morgan Stanley will be moving to the Three City Center office building in downtown Allentown. Part of its lease deal calls for Morgan Stanley’s name to be stripped across the top floor of Three City Center.

Financial services powerhouse Morgan Stanley will be moving to the Three City Center office building in downtown Allentown. Part of its lease deal calls for Morgan Stanley’s name to be stripped across the top floor of Three City Center. (THE MORNING CALL, FILE PHOTO)

Downtown Allentown is again a good investment, according to a company that knows a little something about investments.

Financial services powerhouse Morgan Stanley has agreed to anchor the new Three City Center office complex, continuing the downtown's rebirth and bolstering the city's attempt to re-establish itself as the financial epicenter of the Lehigh Valley.

But for critics of Allentown's one-of-a-kind Neighborhood Improvement Zone, it only strengthens their argument that the tax-subsidized NIZ has created an uneven playing field that suburban landlords can't compete with. The Fortune 100 company will be closing two offices in South Whitehall Township and one in Bethlehem to move 65 financial advisers and client relationship managers to Allentown in February.

"There was a time when Allentown was recognized as the financial center of the region," Mayor Ed Pawlowski said Tuesday in a written statement. "With Nat Penn and now Morgan Stanley returning to the downtown, Allentown is regaining its stature. I remain optimistic that others will want to show a presence as well."

Morgan Stanley officials are counting on that.

"We're inspired by the Allentown story," said Richard Franchella, a managing director and complex manager for Morgan Stanley. "In my 32 years, I've seen a lot of downtown revivals, but this one is special. We're anxious to get back home."

Donald Frederick is anxious about Morgan Stanley's move, too, but not for the same reasons. Frederick built his four-story office building at 3500 Winchester Road in South Whitehall in 2000. He said he wasn't aware Morgan Stanley, one of his best tenants, would be leaving his building.

In the NIZ, developers can harness virtually all state taxes created by their building projects and new tenants to help pay off their building loans. City Center has built or proposed more than $400 million of downtown office buildings, shops, apartments and a hotel. For all that development, City Center received $23.7 million in tax subsidies last year alone.

"[City Center has] tried to recruit all of my tenants," Frederick said. "It's not fair. It's like they're using my tax dollars against me. It's just not right."

Morgan Stanley also will close its offices at 1550 Pond Road, South Whitehall, and 74 W. Main St. in Bethlehem. No employees are being eliminated and the company's office in Easton will not be affected, Franchella said. With the Bethlehem and South Whitehall leases expiring, it made sense to consolidate the offices, and the 22,000 square feet in Allentown will give the company room to expand its staff, he said.

Peter Gebert Sr., whose Franklin Realty Development Corp. owns the Pond Road building, echoed Frederick's opinion that the NIZ is unfair, and he questions Morgan Stanley's decision to leave his three-story building, where the company has leased 10,000 square feet for a decade.

"I'm all for economic stimulus, but not if it means the state's taxpayers are subsidizing one city," Gebert said. "I doubt Morgan Stanley's employees or tenants will be happy about this."

City Center Chief Operating Officer Jim Harbaugh said he has not been poaching tenants from other buildings.

"When a tenant has a lease expiring, they generally go to the market," Harbaugh said. "We're part of the market. We are not knocking on doors."

Whatever the path, Morgan Stanley's return to Allentown is another big win for a downtown that was on a 30-year losing streak.

Franchella said Morgan Stanley was one of several financial firms that spent half a century in a bustling downtown that included three major department stores. But as suburban malls lured those shoppers away, high-profile financial firms fled for the suburbs. That flight included Morgan Stanley in 1990, which left for suburban office space that was more convenient to its clients and employees.

Part of its new downtown lease deal calls for Morgan Stanley's name to be stripped across the top floor of Three City Center, joining the likes of National Penn Bank and Lehigh Valley Health Network as major corporations with logos that accent the city's changing skyline.

None is bigger than Morgan Stanley, which sits at No. 82 on the Fortune 500 list of biggest companies, just ahead of American Express and just behind Goldman Sachs Group. With a market capital value of more than $76 billion, Morgan Stanley employs more than 55,000 people in 43 countries.

"This sends a clear message that great companies are coming back to downtown Allentown," Harbaugh said. "Morgan Stanley is a great company, and we're very pleased that they're putting their trust in us."

Franchella said the company would like to move to Allentown sooner, but it will take until February for its floor to be built and tailored for its use.

The $50 million, seven-story Three City Center began opening in April with the arrival of the law firm Norris McLaughlin & Marcus. The engineering firm of Rettew Associates also has moved in and the restaurant Nosh has opened on the first floor.

More tenants are expected to be announced in the coming weeks, as construction crews put the finishing touches on the upper floors.